Resource title

Tariffs and Firm-Level Heterogeneous Fixed Export Costs

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Resource description

Recent literature on the workhorse model of intra-industry trade has explored heterogeneous cost structures at the firm level. These approaches have proven to add realism and predictive power. This note shows, however, that this added realism also implies that there may exist a positive bilateral tariff that maximizes national and world welfare. Applying one of the simplest specifications possible, namely a symmetric two-country intra-industry trade model with fixed export costs that are heterogeneous across firms, we find that the reciprocal reduction of small tariffs reduces welfare.

Resource author

Jan Guldager Jørgensen, Philipp J. H. Schröder

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18347

Resource license

Adapt according to the presented license agreement and reference the original author.